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January 16th 2018

Self Assessment: how to pay your tax bill (and what you can do if you can't)

As of 13 January 2018, HMRC has removed the option to pay your tax liabilities by credit card, just as your balancing payment for the 2016/17 tax year (including Class 2 National Insurance for self-employed individuals) becomes due on 31 January 2018! You may also have your first payment on account towards the next tax year to pay as well, if your tax liability for 2016/17 is £1,000.00 or more.

HMRC had previously accepted credit card payments, but with the new law banning credit card surcharges coming into effect, HMRC has decided to remove this option altogether.

What payment methods are still OK?

There are a number of alternative payment methods:

  • Debit card online, via HMRC’s website
  • Direct into HMRC’s bank via online or telephone banking
  • Cash or cheque at your bank (if you have a statement and payslip from HMRC)
  • Set up a Direct Debit through your online tax account
  • Cheque via the post – if you don’t have a payment slip, you can print one online (HMRC removed the option to pay your cheque in at the Post Office last month)

See www.gov.uk/pay-self-assessment-tax-bill for more details on each of the above methods.

Whichever method you choose, make sure that the payment reference is your 10-digit Unique Taxpayer Reference (UTR) number (found on correspondence from HMRC, including your Tax Return), followed by the letter ‘K’, so that your payment can be matched up to your tax account promptly.

If your balancing payment isn’t paid on time, HMRC will charge late payment interest - currently at a rate of 3% - until paid in full, and if your balancing payment is not paid in full within 30 days of the due date, HMRC will charge a penalty of 5% of the tax due. Late payments on account are subject to interest, but not penalties.

Unable to pay?

If you are unable to make the full payment to HMRC by the deadline, it’s worth getting in touch with HMRC’s Business Payments Support Service (0300 200 3835) as soon as possible, to arrange a tailor-made time-to-pay arrangement. Under these arrangements, HMRC will still charge interest, however no penalties will be charged provided that payments are made according to the agreement.

Payment plan

If you would prefer to budget your tax payments during the year, by paying in advance of the due date, you can set up a ‘budget payment plan’ through your online tax account. You can choose a regular amount to pay, which HMRC will credit to your tax account. At any time, you can change the amount, the frequency, or even take a break from making payments, as and when required. The amounts you pay will accumulate in your tax account, and will be offset against your tax liabilities as they arise. If your tax liability is less than the payments made, or not yet due, you can request a refund of amounts overpaid.

We are able to help estimate your tax liabilities, so that you can plan ahead, e.g. to time equipment purchases or property sales tax-efficiently, or to budget for your tax liabilities – contact us at any time during the tax year to discuss management accounts and/or tax planning, or to review your payments on account if you feel they are too high.

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